Question

A firm in a decreasing cost industry expands it's production ________.

• A. at the same cost of production
• B. with increased production cost
• C. with reduced production cost
• D. none of the above

Answer 1

The correct option is C with reduced production cost

When a industry is expanding, firms in it are likely to experience external economies of scale these include easier access to the labour market and more negotiating power to deal with suppliers and receive preferential trade agreements. As a result, average cost is likely to fall.